What Are Major Factors That Affect And Determine The Amount Of Premium You Have To Pay for Life Insurance?

What Are Major Factors That Affect And Determine The Amount Of Premium You Have To Pay for Life Insurance?

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Life is the sum of breaths you take and the moments that take your breath away. There are some people who live by this philosophy, and there are others who go into the nitty-gritty of living. But, delving deep is not always bad, especially when you are dabbling with concepts like insurance.

Read on the article to know about the factors that affect and determine the amount of premium you have to pay for life insurance.

What is Life Insurance?

It can be defined as a contract or a policy wherein an insurance company agrees to provide financial coverage to an individual in exchange of a sum of money known as premium. The insurance company will provide a lump sum amount of money to the beneficiaries or nominees of a policyholder if he dies during the time period of the policy. The minimum amount paid by the company to you is called sum assured, which is the amount the policy was bought for. Besides the death benefit, a life insurance policy also offers maturity benefits in case the policyholder survives the policy term.

The sum assured and the tenure of the policy will be chosen by the policyholder, whereas the premium amount will be decided by the insurance company.

The Need for Life Insurance

Who wouldn’t’ want to provide a financial stability to their family? Insurance makes for an integral part of your financial planning since it helps take care of the policyholder’s family when he is no longer around to feed, take care of and clothe them. Life insurance prepares you for the day that hardship hits you, so you don’t add to your already existing troubles another mound of debts and similar burdens.

Life insurance doesn’t only provide a financial cover to the family, but also helps in repaying any debts the policyholder might have taken during his life. It can also be used to pay off any impending mortgages and loans and can help pay medical bills as well during any unfortunate accident caused to the policyholder. Life insurance is also an effective tax-saving instrument.

Buy Best Life Insurance Plans

Life insurance isn’t something that can be taken lightly. One needs to scrutinise each detail before they buy one as it is as important a decision as marriage or higher education, because a life cover also goes on for life.

These days, you can evaluate the life insurance plans at your disposal from the comfort of your home. Websites like Coverfox.com displays all kinds of life insurance policies, and you can receive the policy within a few minutes of your transaction. But, you need to do the market research carefully before you opt for a plan.

Here are the types of life insurance plans for you to scrutinise, in no particular order:

  1. Term Life Insurance Plans: These are basic plans created to provide financial cover to the dependants of the policyholder in case of his untimely death. These don’t pay out if in case the policyholder is alive on the date of the maturity. It is like an umbrella which opens only on the rainy day, i.e, the payment can be received only at the end of the contract.
  1. Whole Life Insurance Plans: These policies are responsible for the life risk of an individual for their entire lifetime. In case the insured dies, his family would receive the complete pay-out post his death. The premiums of whole life insurance plans are relatively higher, but they give out both death and maturity benefits respectively.
  1. Endowment Plans: These work as both investment cum insurance instruments which give out the sum assured to the beneficiary in the event of the death of the insured. The only difference between an endowment plan and term plan is that the former offers both a death benefit and a maturity benefit as well. In case the insured person is alive when the policy nears its end, the premiums paid by him will be returned to him on the date of maturity of the policy.
  1. Money Back Plans: They are considered to be one of the best and most effective insurance plans as they give out periodic payments to the policyholder. If the policyholder is alive on the date of maturity of the policy, they insurance company will dish out the total premiums made by the policyholder along with an additional bonus which is akin to a return on investment. Death benefit is also available in this kind of plan.
  1. Pension Plans: They are traditional form of plans where the policyholder can pay money in lump sum amount to purchase something called annuity. Annuity is a form of investment given in annual sums and are received by the policyholder during regular intervals of time. Such a plan is perfect for individuals who are retired or who are nearing retirement as it offers liquid money and life cover as well and proves itself to be a regular income stream. The benefit of this policy, however, can be availed only during the policy term and not after the policy is officially over.

 Comparison of Life Insurance Plans

Here is a table explaining comparing the various insurance plans:

Name of plan Features
Term Life plan Death benefit, no maturity benefit
Whole Life plan Death benefit, maturity benefit
Endowment plan Death benefit, maturity benefit
Money back plan Death benefit, maturity benefit
Pension plan Death benefit, maturity benefit, annuity

Factors Affecting Life Insurance Premium

There are certain pre-determined factors that affect and regulate a life insurance premium and the policy. They are given below:

  • Age: The core of all factors rests on this one factor. The age of the policyholder determines all other factors. It is helpful to take on a life insurance policy early on in life as a person is generally risk-free during the bloom of his youth and does not have any serious medical conditions.
  • Smoking: Smoking is one deadly habit is generally considered to be a red flag for insurance companies. This is not to say smokers are not sold insurance policies – they are, just that their premiums are higher than the non-smoker.
  • Gender: Women enjoy slightly lower premium rates as compared to men, so it can also be counted as a genuine determinant of pricing.
  • Ongoing health: Generally, insurance companies make their prospective clients undergo a medical examination in which the person’s height, weight, blood pressure, cholesterol and other key metrics are examined. Post this medical examination only is the policy sold to the client.
  • Family medical history: The medical history of one’s family is also a vital determinant, though it may not look like one. Conditions like stroke, cancer or other serious medical conditions tend to generally predispose people to similar ailments eventually. Insurance providers are usually interested in any conditions your parents or siblings have experienced, particularly if they contributed to a premature death.
  • Lifestyle: Some insurance companies examine the lifestyle of a person before they dish out the policy. For example, if you are in a risky profession or have a life full of drugs, rash driving and rock n’ roll, you might be eyed carefully before you are handed that perfect insurance policy.


There are several factors governing and affecting a life insurance premium, and rightly so because only on the basis of such factors can the right policy be sold to you. Therefore, one should keep in mind such factors before they purchase a life insurance policy.

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